LEGISLATIVE COUNSEL'S DIGEST

The Personal Income Tax Law conforms to specified provisions of the federal Mortgage Forgiveness Debt Relief Act of 2007, relating to the exclusion of the discharge of qualified principal residence indebtedness, as defined, from a taxpayer’s income if that debt is discharged after January 1, 2007, and before January 1, 2010, as provided. The federal Emergency Economic Stabilization Act of 2008 extended the operation of those provisions to debt that is discharged before January 1, 2013.

This bill would extend the operation of the exclusion of the discharge of qualified principal residence indebtedness to debt that is discharged on or after January 1, 2013, and before January 1, 2014. The bill would become operative only if SB 391 is enacted and takes effect.

This
bill would declare that it is to take effect immediately as an urgency statute.

Digest Key

Vote:
2/3
Appropriation:
NO
Fiscal Committee:
YES
Local Program:
NO

Bill Text

The people of the State of California do enact as follows:

SECTION 1.

Section 17144.5 of the Revenue and Taxation Code is amended to read:

17144.5.

(a) Section 108(a)(1)(E) of the Internal Revenue Code is modified as follows: to provide that the amount excluded from gross income shall not exceed $500,000 ($250,000 in the case of a married individual filing a separate return).

(1)To provide that the amount excluded from gross income shall not exceed $500,000 ($250,000 in the case of a married individual filing a separate return).

(b) Section 108(h)(2) of the Internal Revenue Code, is modified by substituting the phrase “(within the meaning of section 163(h)(3)(B), applied by substituting ‘$800,000 ($400,000’ for ‘$1,000,000 ($500,000’ in clause (ii) thereof)” for the phrase “(within the meaning of section 163(h)(3)(B), applied by substituting ‘$2,000,000 ($1,000,000’ for ‘$1,000,000 ($500,000’ in clause (ii) thereof)” contained therein.

(c) The amendments made by Section 202 of the American Taxpayer Relief Act of 2012 (Public Law 112-240) to Section 108 of the Internal Revenue Code shall apply.

(c)

(d) This section shall apply to discharges of indebtedness occurring on or after January 1, 2007, and, notwithstanding any other law to the contrary, no penalties or interest shall be due with respect to the discharge of qualified principal residence indebtedness during the 2007 or 2009 taxable year regardless of whether or not the taxpayer reports the discharge on his or her return for the 2007 or 2009 taxable year.

(d)

(e) The amendments made to
this section by the act adding this subdivision shall apply to discharges occurring on or after January 1, 2013.

SEC. 2.

This act shall become operative only if Senate Bill 391 of the 2013–14 Regular Session is enacted and takes effect.

SEC. 3.

This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:

In order to provide tax relief to distressed homeowners at the earliest possible time, it is necessary for this act to take effect immediately.